Investors who buy bonds that are callable

Question

Quizplus · Accepted Answer

Investors who buy callable bonds face the risk of having their bond called back by the issuer, forcing them to reinvest their money at a lower rate. This is known as reinvestment risk, making option B the correct choice. The other options are incorrect as callable bonds generally have lower default risk and may even have higher interest rate risk as the call feature protects the issuer from rising interest rates. They may also be sold at a premium or discount depending on market conditions.

Investors Who Buy Bonds That Are Callable